Individual Retirement Account Changes for Tax Year 2020

IRA Changes for Tax Year 2020

There are new provisions affecting IRAs (and employer-sponsored retirement plans). Some of these changes are for tax year 2020 onward, while others are temporary provisions in response to the coronavirus pandemic. We’ve outline a few of them for you here. For specific tax advice, please consult your tax advisor.
Tax year 2020, going forward

• Required Minimum Distributions (RDMs) now begin at 72. If you turn 70½ in 2020 or later, you can stay invested in your IRAs or defined contribution plan longer. The age for RMDs is now 72.
• Traditional IRA contributions can be made at any age. You can continue to contribute to an IRA, regardless of age, if you’re still working and receiving earned income.

Tax year 2020, temporary coronavirus provisions

• Required Minimum Distributions (RDMs) waived in 2020. The CARES Act waives the required minimum distribution (RMD) in 2020 for plan participants, IRA owners, and beneficiaries. This also applies to individuals who turned 70½ in 2019 and did not take their first RMD before January 1, 2020. Those having already received their 2020 RDM may return it if within 60 days of the distribution.
• New Coronavirus-Related Distributions (CRDs). Qualifying coronavirus-related distributions up to $100,000 in aggregate from eligible IRAs and employer-sponsored retirement plans are exempt from the 10 percent early distribution penalty tax and the normal withholding requirements. Individuals may repay qualifying distributions within a three-year period. Distributions not repaid generally will be taxed ratably over a three-year period, unless individuals elect otherwise. Restrictions apply.

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Helpful links

https://www2.ascensus.com/tag/irs-guidance/

https://www.congress.gov/bill/116th-congress/house-bill/748/text

https://www.irs.gov/r